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Liquidity considerations will limit the number of markets in a competitive economy. Welfare implications are ambigious. Since liquidity is a positive externality, there may be too little liquidity per market at a noncooperative equilibrium and too many markets compared to the surplus-maximizing...
Persistent link: https://www.econbiz.de/10005241019
The author compares the incentives firms have to produce individual components compatible with components of other manufacturers instead of "systems" composed of components that are incompatible with components of competing manufacturers. He shows that, even in the absence of positive...
Persistent link: https://www.econbiz.de/10005573562